Hispasat CEO Shrugs Off Digital+ Outcome

Spanish satellite TV provider Digital+ has signed an agreement with Spanish satellite operator Hispasat and Luxembourg-based satellite operator SES Astra to use both of their satellite platforms to broadcast its programming. The decision by Digital+ owner Sogecable is a surprise because many expected the company to choose one platform over the other. When Hispasat CEO Jacinto Garcia Palacios spoke with International Editor Mark Holmes in April, Palacios was confident that his company would be selected as the sole platform.

So, it could be argued that the agreement is good and bad news for both players. While both satellite operators would have preferred to be the platform of choice, the agreement with Sogecable provides long-term security for the companies as well as the customers. In an exclusive interview with SATELLITE NEWS, Palacios talks about the Digital+ deal and future plans for his company, including expanding in Latin America.

SN: What is your reaction to Digital+ using both SES Astra and Hispasat for its satellite platform?

Palacios: It is a very good thing for Hispasat as well as the users. With this arrangement, we are avoiding making a number of modifications in a certain number of houses. That is important to avoid people canceling their subscriptions. The first part of this agreement is to keep happy the majority of the users who are receiving DTH [direct-to-home].

For Hispasat, it is also a good decision … You have to take into account the moving of the antennas and that would have been costly for each one of us. Secondly, there would have been problems if neither of us had had this contract because it is an important part of our revenues. This agreement ensures our position until 2017, and the revenues we will derive from this mean it is good news for us.

SN: When we spoke in April, you were confident that you would be the sole platform of choice for Digital+. Is it not a blow that it has decided to retain both your company and Astra? Was the decision a surprise?

Palacios: In terms of whether the decision was a surprise, there were probably many reasons for that. But maybe you should ask them. One thing to consider is that they have a certain number of terminals in stock. They don’t want to throw them away. So for the time being, until they use all these terminals, they are better having both platforms in operation. They don’t have to get rid of some of the terminals … It is a cost reason. For Digital+, there was also the issue of going to certain users and saying that they needed certain modifications of the installation. So, this was a big thing for them. I think they have made a decision that reduces their costs as much as possible. This is the main reason.

I don’t think there is a sense of disappointment because there were technical issues. The satellite we have flying today mainly covers the south of Spain and certain areas outside of Spain, such as North Africa. We have better coverage there. It means we will grow most in the areas where we have better coverage and Astra will grow in the areas where they are strong. It means the equilibrium for both companies will be reached in a certain number of years. It is good for both players. It gives us the opportunity to reach the same level. The relationship between the two companies has always been good despite the fact we are competing here. Now, we will have a better relationship and we will find a better way of providing satellite services to Digital+.

SN: Digital+’s predecessors, Via Digital and Canal Satelite Digital, struggled in the Spanish pay-TV market before the merger? With one dominant satellite pay-TV provider in Spain, what are your expectations for the market?

Palacios: What I know today is that Digital+ is growing and they are growing significantly. So, they are not losing any more subscribers. Today, they are getting more and more new subscribers. The offer is good and people are happy with what they are receiving.

SN: When we spoke before, you had just done a deal with Nera for satellite broadband. With other operators, such as SES, aggressively targeting the satellite broadband market, how do you view the opportunities for Hispasat?

Palacios: We are making a big effort in this area. We are competing very strongly for all the bids, which will be made in the next month, either by the government or by corporate entities in Spain. We have redeveloped our platform. We are now developing a broadband platform for Brazil and other countries in the region. It is part of our development. We already have won a contract with the Spanish government for rural areas. We expect more contracts like that. In terms of new things coming on, I suspect Hispasat will have a slight advantage in the broadband arena.

SN: With Eutelsat recently launching its e-BIRD satellite to target the broadband market, how will this benefit Hispasat?

Palacios: We have good synergies with Eutelsat. We are well-matched in Europe and Latin America. We have reached a certain agreement with Eutelsat, which means we will have a common product. So, that means Hispasat will be able to sell the product of Eutelsat in certain parts of the world like Latin America. Eutelsat will push the broadband part of Hispasat in the areas where we are well-placed. The relationship is very good. From Eutelsat’s perspective, the synergies become better and better each month.

SN: Can you give us an update in terms of insurance for the new Amazonas satellite covering Latin America? Are you still on track to sell 30 percent of the capacity before launch?

Palacios: We have already sold around 28 percent of capacity on Amazonas. In the next few days, we will announce to the market what we are doing in terms of insurance for Amazonas. This will be done before the end of the year. Everything is on track for launch. Amazonas is already at the terminal being tested. The first tests have been good. Once all the tests have been finished, we will be more certain of the schedule. But, we still aim to be flying the satellite between May and July.

SN: What levels of revenues are you looking from Latin America this year? How do you see the opportunities for satellite broadband in the region?

Palacios: There a number of possibilities in terms of the market in Latin America, but people who make decisions in the market are waiting for better times. Transponder prices have gone down. This situation will remain for a certain number of months because there is too much capacity in the region. But having said that, there is not a large amount of Ku-band capacity, so we expect once Amazonas is launched successfully, we will [see prices pick up].

SN: Finally, what are your hopes and ambitions for the company over the next year?

Palacios: We are now in the process of having our budgets approved, so I cannot talk about that until they have been approved by the board. What is important for Hispasat over the next year is quite clear. We have to consolidate the position of Amazonas. That is the first aim. Secondly, we want to consolidate our position in terms of military/government services. That means our SPAINSAT satellite has to fly. Also, we need to maintain a backlog with our customers. We need to have security in terms of cash flow. All the capital expenditures of the company have been decided for all these investments a long time ago. We have no new capital needs. We don’t need to review our debt. It is under control. We expect the market to recover by the end of 2004 and the beginning of 2005.